Cause and Effect in European Politics and Law

In 2010 Bulgarians will work more for the state

euinside, January 8, 2010

In 2010 the Bulgarians will work for the state 5 months to pay taxes. The so called "Liberty Day from the Government" in the past several years was in the end of May but in 2010 it is expected to jump into June, the Institute for Market Economy (IME) forecasts. The economist Petar Ganev has made his calculations based upon comparison between the revenues in the budget and the GDP. "We take the revenues and not the expenditures because it is the revenues that show how much the state takes from the citizens and the business through the year. In 2010 the Bulgarians will work for average 174 mn levs (89 mn euro) for each day of the calendar. This is measured through the expected GDP for this year. Therefore, in 2010 Bulgarians will need 152 days so as to work for the expected 26.4 bn levs (13.5 bn euro) revenues in the budget. Last year, for example, we have worked 3 days less to fill the Treasury in".

The time which citizens spend to serve the state and fill the Treasury in is an indicator of the role of bureaucracy and the level of redistribution of the economy. For years different governments (left, right and centrist) promise a reduction of state's role in the economy, but this is never successful. At the moment it is relatively high - 40% of GDP is being redistributed through the state. The new government of Boyko Borisov has promised to decrease this share to 38%.

Petar Ganev also says that the Bulgarians spent most time to pay VAT - 39 days. For social securities they spend 29 days and for excises - 26 days. Direct taxes are being paid the quickest - the income tax takes only 11 days and the corporate tax - 10 days.

So as to get the picture in full, the IME makes a comparison with other countries. For example the US will celebrate their Liberty Day. The Americans will start working for themselves on the 13th of April, the Australians - on the 22nd of April and the Estonians - on the 24th of April. In may free from the taxation grip will become Britain, Spain and Brazil and in June - Belgium, the Czech republic and Croatia. Until the latest for the state will work the Germans, the French, the Swedish and the Norwegians.

The IME points out however that in those countries that Liberty Day comes at a later stage, citizens usually get more from the public sector - in the form of services, social payments, etc. This is especially typical for the Scandinavian countries. On the same indicator Bulgaria is significantly lagging behind because, on the one hand, the state takes away a large part of people's wealth but does not offer anything instead - unsatisfactory services and/or results in the form of pensions, security, education, healthcare or roads.

Mr. Ganev reminds of another fact which comes into light each year: "The larger share of the state is related to lower economic growth because the redistribution leads of less economic activity of the resources used in the economy, and often it leads to financing of projects of the state with controversial economic effectiveness or usefulness for the society. Subsidizing of losing enterprises and activities of the public sector is being paid de facto by the employees and the business while this money could be used in profitable activities, to add value in the economy or to create more jobs".

IME makes several proposals which are also not new but so far no government has not at least tried to introduce:

- A serious reduction of social burden in the country - it is still somewhere around 30%;

- Real fiscal decentralisation giving mayors the power not only to increase or reduce taxes but also to abolish old or create new taxes. The transfer of direct taxes (on incomes and corporate taxes) towards local authorities is also an interesting alternative in the short-term. This opinion is being shared by most regional mayors;

Introduction of zero tax over reinvestment of profit, abolishment of the tax over dividends and a reduction of the tax for single traders from 15 to 10%.

Unfortunately, the euinside is afraid that a great part of these proposals will again be neglected. The relatively short life of the government of the minority of GERB (which started work in July last year) shows hesitation when taking important decisions, it easily abandons any idea when there is the slightest indication of social pressure and rarely holds consultations on strategic issues with other political forces or independent experts. This is bad not only for the ruling party itself but for the economy of the country which is going through the hard test of the crisis unreformed and without any good perspectives in the future.